failure to disclose

My husband and I just bought a 1200 sf rancher built sometime in the fifties with the intention of adding second story, and finishing the basement. When we initially looked at the house, the basement was freshly dry-locked(should've been our first clue), and a sump pit existed on one side of the bm. It is a walkout bm on a sloped lot. The sellers told us the previous owners(2005)had reported some dampness in basement, but they had not experienced any water issues. We pressed the issue several times over email, but they responded repeatedly that there was only "some dampness".

A few weeks after we moved in , we had a full perimeter french drain installed with 2 sump pits, because our plan is to use it as living space. During excavation of perimeter, we were shocked to see the entire trench filled with at least 6 inches of water. The installer, who is familiar with the neighborhood, told us the water table is VERY high here. Our sumps have gone off several times each hour since they were installed last month, sometimes as much as every 5-10 min.

We spoke with or neighbor last week who informed us that previous owner DID INDEED have a large flood incident last year, losing everything in the basement. He insists they sold the house because of water issues. He is willing to testify to that.

Obviously, the seller is in the wrong. We have sent them notice through our attorney that they have not escaped this transaction unscathed. I do not wish to turn this into a long legal battle, although my husband is beyond angry. I want to know that I can have piece of mind re: condition of foundation, which has been subjected to water intrusion for so long without proper drainage. Is it stable enough to hold up 2nd story addition? How do I know the current french drains will keep up with all the water during winter thaw and rainy season? Can this house still be what we envisioned it to be (for the next 15 yrs)?

We are working with an attorney on the matter. Ultimately, however, we will direct him in how to proceed. Yes, it's not a forum for legal advice, I was just interested to see if anyone had some unique insight they would like to share.

There wasn't. But the fact that my neighbor is willing to say what he knows re: the situation is enough to move forward. I'm just not sure what "moving forward" means at this point. I need to have my policy interpreted for me. It does not cover "surface water". I'm not sure if this means ground water. I'm thinking it does, so ins. will be no help to us should something happen. Thanks for reminding me, I knew I needed to do something today...call my agent!

This may possibly be sort of a "non-issue". It would be up to your lawyer and/or structural engineer to determine this. I am not trying to minimalize your situation, as a foundation with severe water leakage can be a big problem.

What I mean is if you were intending to build a 2nd story on the original 1950's foundation (that at the time of its construction was built to support a 1 story house), you may not have a real case against them in the first place. 1950's building standards, especially for concrete mixes are not as stringent as what they are today. So that alone can explain why a 60 year old house has water issues. Have you ever seen these prison escape movies where someone digs out the wall with a spoon? It is very realistic. I had a 1940's house that you could pull chunks out of the foundation with your fingernails. Yes, kind of alarming, but even with that, the foundation was still holding up, so not really an issue.

As long as these water issues can be controlled (by the french drain and by sealing), it may not be anywhere near as big of a deal as you are thinking it is. If indeed the previous owner had a flooding problem, the fact that he did not mention it, does not mean he failed to disclose anything. What I mean by that is, yes he DID have a problem, but after having that problem, he FIXED it, then it is no longer a problem. Therefore it is not worth mentioning. Lets be honest here......if you were selling a house, would you own up to that, especially if the problem had been corrected? Again, even if the ground was totally dry and the foundation was totally waterproof - there is still a possibility adding a 2nd story would not have truly worked on the existing foundation to begin with, without some modifications. I don't know what sort of legal damages (if any) you really have here. I guess thats all up to the lawyers.

When you come down to it, there are a lot of things people should disclose, but never do. It has nothing to do with criminal intent, it has everything to do with selling a house. You raise any red flags, someone may freak out and now you don't sell your house. Anther thing to think about here.....you had a house inspection performed before purchasing the house didn't you? As long as the inspection passed, and failed to show any of these problems, this means either it really wasn't a problem, or the house inspector was incompetant and even he could be named in your lawsuit.

I have to agree with 'ragtop'. Everything he said makes sense. My son and his wife bought a house several years ago and it had water issues like this. It is a split level house and the lower level gets water and dampness in it when there is alot of rain. Their seller did not disclose any water problems and since they bought the house in the summer, it was several months until they had a problem. My son has done everything he knows how to do, french drains, sump pumps, sealing around the foundation, etc. He still has problems, just not as bad. So sorry you are going through this, hope you get some answers!

jerzeygal, I'm going to chime in on a few things. I'm not an attorney or real estate agent/broker. I do however work as a marketing manager for a large home inspection company. I'm also the education coordinator for our real estate school, teaching continuing education to Realtors. I do hope you had a home inspection, if you did you or your attorney should immediately contact them. Your agent, and the broker of the office, should also be involved in this dispute. Both the inspection company and the real estate office should carry E&O insurance. (Errors and Ommissions). Depending on the size of the claim, this will ultimately reach their insurance carrier, but it may take litigation which is a loooooooog process.

Your agent has a fiduciary duty to protect you during the transaction, that includes doing due diligence with regard to property condition and disclosures. Most agents do not rely on seller disclosure (yes, sellers do lie - unfortunately). Did your agent suggest a home inspection? If he/she did not, they breached their fiduciary duty. The agents primary job is to protect their client and that includes advising them of their best options to minimize risk when making a purchase.

Realtors and Home Inspectors rely upon referrals, and therefore don't want to be involved in any disputes - they just want them to go away. And, in many cases, they are willing to reach into their own pockets to remedy a problem.

I'm wondering if you live in NJ. If so, the laws in your state are written with extraordinary protections for the consumer. A good attorney should be able to help you navigate a solution.

If you declined to get a home inspection, did you sign a waiver? If so, this may minimize the agents exposure. Either way, you should involve your agent. Believe me, he/she wants this to go away and be resolved to your satisfaction.

I agree with cas66ragtop. Please keep in mind that the helpful neighbor may just have some ax to grind with the former owner and may know nothing at all about a water problem.

I'm surprised you already have installed a second system outside. Have you had water yourself? If the water table is indeed high, be glad the sump is working as much as it is.

I have had two houses with basements--both with water issues. The first one we put in the interior drain system. It was guaranteed for life of the house and we passed the paperwork on to the next owners. When they were looking at the house, though, they freaked out that there was a sump at all. Funny thing is, after we put a ground level addition on the front of the house, the sump was dry as a bone. In our current house (just on the market) we woke up to a literal waterfall in the basement coming out of the sidewall. We are pretty sure the previous owner knew about it--a neighbor who is an agent they interviewed seemed to know about it. Anyway, we moved downspouts and had a small trench to the floor drain (3 feet) installed and have not had water since. I don't intend to mention the issue unless the inspector wants to know why there is a trench on one wall. The basement is and has been dry for years.

Good luck with whatever you choose to do, but most states are Caveat emptor,

If indeed the previous owner had a flooding problem, the fact that he did not mention it, does not mean he failed to disclose anything. What I mean by that is, yes he DID have a problem, but after having that problem, he FIXED it, then it is no longer a problem.

That depends. Does your state require that a seller fill out a Property Disclosure Statement? If so, does the disclosure specifically ask if there has been any water or dampness problems, and if so, was the problem remediated? IF they didn't answer truthfully to those sorts of questions then I imagine that you have grounds for a lawsuit, regardless of whether or not they had made repairs.

If you are in NJ; I can tell you that last year; houses that never had water problems did have water problems. It was all over the news last year when all the snow started melting. There was also a day in my development where the power went out for 8 hours; so all of our sump pumps did not work.

My neighbors were taking water out of their basements with buckets; thankfully we stayed fairly dry. I think what saved me was shoveling around the house because I had a feeling the water would have no where to go; & I tell you this; in case we get more big snow. We went out there when it started melting; did the same thing this year.

The house next to me is for sale; it's obvious they've had a water problem because their driveway; sidewalk & road is stained from them draining the sump pump water in the street. Do you see any evidence of a water problem? It's pretty hard to get that rusty stain off of stuff.

I agree about the neighbor possibly having problems with the old owner.

If you're in South NJ; Philly area; I can recommend an engineer out of Cherry Hill. If anyone can give you advice about the foundation; it's him. I actually think he covers his butt a little too much; but it sounds like what you'd want.

It was smart to do the sump pump; if you're in South Jersey; can I ask who you used? If you're not comfortable putting their name in the forum; send me an email from my member page. I called Mid Atlantic water proofing before reading feed back on them; so now I'm looking for someone else. I don't need a sump; just want someone to come out & seal it.

As far as building a 2nd floor; do you have enough property to add on at ground level? Our last house was an L shaped rancher; we had a lot of room.

gayled, although NJ has decent legislation, I would not go as far as categorizing it as extraordinary in terms of consumer protection.

That said, if there was no visual evidence of water intrusion and/or damage and/or dampness at the time of inspection, any advice to the buyer to pursue a claim against the E&O insurance of the HI is irresponsible...and it is that type of thinking that has jacked up the cost of HI E&O unreasonably.

HI's can ONLY report on what is visible on the day of inspection. If the slope of the property is toward the foundation, he should have advised further evaluation for possible re-grading.

However, if the seller camouflaged any evidence of water intrusion, why in the world would you want the OP to pursue the inspector?

That said, disclosure is not required in NJ. However, if the seller filled out a disclosure form, stating that there was no water intrusion issues, and it can be proven that there were, he/she can be nailed for fraud, which usually entails triple damages.

The same is true even if a disclosure was not filled out, and it can be proven that the seller knew full well of the problem...and all this is done by finding the paper trail...e.g. the contractor who was hired to fix the problem.

As far as structural issues, first and foremost, even if the basement was as dry as a desert, the only way to know for sure what would need to be done to support a second story is to have the structure evaluated by a licensed P.E. with a specialty in structural engineering.It may be that the house was not designed to support a second story period..water issue aside.

Last but not least, "lifetime warranty's" are only as good as the company behind the warranty...if they go out of business for some reason..what then?

If you are in NJ roselvr is correct...basements that never flooded before have done so over the past year or so...and if your lot slopes toward the home, the HI should have mentioned that as a possible problem in the report and recommend that it be evaluated by a landscape pro for re-grading. Did he? If so, did you have it evaluated?

"Thanks for reminding me, I knew I needed to do something today...call my agent!"

jerzeygal, I hope you did call your agent. That was precisely the reason why I made my post. Your agent and your home inspector (if you had one) are the professionals in the transaction and should therefore be involved in seeking a remedy to the situation. Their responsibility to you extends beyond the closing.

It is almost impossible to prove a seller perpetrated a fraud. Your efforts are much better served by working with your agent/home inspector for resolution. In the event of litigation they will be held to a much higher standard than the seller.

Logic, I posted as an advocate for jerzeygal to help her resolve her problem. She does not have to "go this alone." Even though she is post-closing, the transaction team (agent/inspector/broker) still have responsibilities to her, as their client. The very last thing to think about is that the home inspector might have an increase in his E&O insurance premiums....now that's irresponsible.

marys1000 - Hpothetically, let's just say that jerzeygal has the financial and emotional stamina to pursue litigaton against the seller. It would probably be several years before this ever saw the inside of a courtroom. It's unlikely that the neighbor is going to have a clear recollection or even first hand knowledge (did he actually see the water in the basement??). In order to prevail, jerzelgal has to prove that there was intent to deceive...and that is very very difficult. The Seller will swear up and down there was no water in the basement while he owned the house. The neighbor will have to present unbiased testimony that he witnessed (first hand) water intrusion in the basement. It's one thing to exchange neighbor chit chat, quite another to get on a witness stand. Mind you, all of this is taking place several years from now and many $$$$'s from now.

All in all, it's much better to seek resolution through the professionals that were there to protect jerzeygal in the first place. There is one other unknown in the equation, and that is if the house was a FSBO or there was a listing agent involved. The listing agent also has some responsibilities regarding property condition disclosure.

Litigation should be a last resort. The agent, broker and maybe a home inspector were there to protect her interests. If they did not do that, they should be held to account.

The standard of proof for a lay person is "What did you know, and when did you know it?"

The standard of proof for a professional is the same as the above and also includes "What should you have known?" There is a presumption (by the courts) that a professional should have a greater understanding and awareness of property conditions. They are held to a much higher standard.

Gayled, in your first post you stated as follows: " I do hope you had a home inspection, if you did you or your attorney should immediately contact them. Your agent, and the broker of the office, should also be involved in this dispute. Both the inspection company and the real estate office should carry E&O insurance. (Errors and Ommissions). Depending on the size of the claim, this will ultimately reach their insurance carrier, but it may take litigation which is a loooooooog process."

That statement assumes a claim is warranted against both the agent and the HI. As there has not been any info provided that points to any fault by either professional, or even if the OP utilized the services of either, the advice is premature at best.

From what we DO know, the seller admitted to some dampness and the neighbor said there had been water problems. None of this indicates that there was any evidence of such on the day of inspection.

That established, if the neighbor recalls the name of the contractor who performed any work related to the water issue, the OP can contact them for the paper trail which would make her case much easier to win. In addition, in the event of a law suit against the seller, if there was an HI and/or an agent, they will get named anyway IF in NJ, due to the entire controversy doctrine.

The HI AND the agent will have to pay the deductible on their E&O for cost of defense, even if they had zero fault.

That is why one should not jump to involve a professionals insurance carrier unless it appears likely that they did indeed drop the ball.

I am in NJ. The seller did complete a written disclosure stating no flooding, water issues except dampness previous owner had experienced. I have no reason to doubt my neighbor- an educated professional who was shocked when he found out what we were not told. Again, I don't want to litigate this. I am fairly certain the sellers couldn't pay if we were rewarded in court. And I am not out to financially ruin lives. But I am very interested in protecting my financial interest. I now have to disclose these water/drainage issues if I choose to sell. To what degree has their problem become my problem? It may well be a non issue- I hope that it is. But I certainly don't look kindly on someone who intentionally deceived us multiple times in order to unload their property. An engineer will come to look at the property next week, and if they feel the house is sound, I can move forward finally. If not, we'll see where it takes us.

Jerzeygal, it seems that they may indeed have committed fraud. At the very least, ask them to assist with any cost to fix the problem. If fixed, check with your attorney regarding how to handle that in terms of disclosure. If it will devalue your home, you have some decisions to make.
Knowing that they could be sued for fraud, the cost of defense as well as an award for triple damages if found guilty may motivate them to at least help wit the cost.

I can understand your not wanting to ruin their lives but I also understand your dismay.

If what gayled says is true then disclosures are meaningless and I intend to lie from her forward as I feel like I must be the only stupid one that hasn't done so!
Is everyone out there treating this as a worthless piece of paper?

I don't feel that a HI can find these sorts of issues and its unfair to go after a guy that looked around your house for a couple of hours and a few hundred bucks.

I agree with the suggestion of trying to find any contractors etc. that did work although I'm not sure you can compell them to give you evidence in the form of receipts? How about the dri-lock guys? I'd draw a 25 mile circle on a map and call all water damage type companies and see if you can find anything.

We spoke with or neighbor last week who informed us that previous owner DID INDEED have a large flood incident last year, losing everything in the basement. He insists they sold the house because of water issues.

I looked up drylocked; seems like it's a sealer. What about the floor? Was it painted? If the basement was wet; there should be water staining; we have staining where our basement got wet from last years thaw.

Good luck with what you find out. I'm curious if it was wet once; as I mentioned; a lot of basements leaked last year that have never leaked or if it was always wet. My guess is that if he "lost everything" his basement did not get wet until last year because who would keep stuff worth anything in a wet basement?

I'm also curious about the neighbor & his basement. Did he have water too?

Every two years NAR (National Association of Realtors) publishes a report called Legal Scan. This report chronicles the most pressing legal issues facing Realtors. Property condition disclosure ranks as the #3 most disputed area in a transaction.

Because water intrusion is so prevalent and damaging to the structure of a home, agents/brokers/home inspectors are usually trained to look for warning signs. These include a freshly painted basement, negative exterior grading, mold, smell, efflorescence (white residue), as well as as a host of other signs and symptoms.

In theory and in practice, should any of these be present the Buyers agent has a duty to further pursue an explanation in order to protect their client. Obviously a home inspection is the first layer of defense. Secondly, the buyers agent should gather additional information from the sellers agent. In other words, ask questions. Jerzeygal explained that she had direct dialog with the seller - this is unusual. The agents (selling & listing) are generally involved and they bear witness, and usually document, the responses. This sure helps if things go wrong.

It is important to understand how these situations are usually resolved. This is how they usually play out:

Jerzeygal calls her agent and tells him/her about water in basement and what the neighbor said.

Jerzeygal calls home inspector (if she had one)and explains the above. When he submitted his report he may have suggested, as logic said, a further evaluation. If he did, and jerzeygal didn't comply - he's off the hook. If he didn't, he will re-visit the site to determine if he missed something. This is obviously subjective. Logic is correct in that an inspection is a moment in time, but if there were conditions that could LEAD to water intrusion, they should have been mentioned in his report. Again, he has a higher standard than a lay person.

Next the buyers agents should call the listing agent and say, "Hey, my client has a basement filled with water and according to a neighbor your client lied." In turn, the listing agent should pursue this with the seller.

The two agents have a responsibility to investigate and it provides third party documentation.

Many things can happen from this point forward, much of which is determined by the size & scope of defect and remediation - but the agent(s) should be involved. Agents live by referrals, they want their clients to be happy and they want disputes to "go away" quickly. Hopefully jerzeygal worked with a seasoned professional that will bring this to a satisfactory conclusion.

marysl000 - it is faily well understood in the industry that sellers may have "selective amnesia" with regard to disclosure. A good listing agent will question the seller and really scrutinize the property because they don't want to be a party to any disputes. Buyers agents (good ones)usually have sufficient knowledge of property conditions and can identify potential problems and insist upon a home inspection. TRUST, but verify!

Moral of the story - make sure the agent you work with knows what they're doing.

I noticed this post on another thread - thought the info was appropriate here. It relates to home warranties, but note how the problem was ultimately resolved:

We also had problems with our home warranty (AON) but luckily the seller's agent worked with our buyer's agent to get what we needed. Our A/C went out about two weeks after we moved in. It took two weeks to get someone to look at it. They claimed to have fixed it. Then a month later, the A/C broke down again. Another two weeks before someone could look at it. Different A/C company. They fixed that. Two weeks later, A/C breaks down for the third time (!). This time the technician came the next day. He told us he couldn't fix it because it was a maintenance issue !! Charged us the deductible anyway. My husband called AON to complain and they then allowed that if the A/C isn't working then it had to be fixed so they called yet another A/C company to look at it. This one said the A/C had to be replaced. AON said they could replace it but they only covered about $800 so we had to fork over $3500!!
That's when the RE agents got involved. Two weeks later, AON said they would cover all the costs of replacement IF we went with their stuff or we could get cash. We grabbed the cash.

I'm just grateful that the agents on both sides of our home purchase transaction went to bat for us. I don't know how common that is. It certainly got things going for us

Jerzeygal writes:
"The sellers told us the previous owners(2005)had reported some dampness in basement, but they had not experienced any water issues. We pressed the issue several times over email, but they responded repeatedly that there was only "some dampness".
A few weeks after we moved in , we had a full perimeter french drain installed with 2 sump pits, because our plan is to use it as living space."

This, IMO, is where your case falls short...
1. The sellers did disclose water dampness.
2. The sellers had a sump pump put in, and the buyers saw it there. I am sure there would be water in it, because of the high watert able. So you should have seen that.
3. The buyers installed an interior french drain and two sumps BEFORE any problem ever existed. No problem ever occurred. The sellers sump pump was in good working order, and there was never any water penetration into the basement since the new owners took posession. The only item that you have a beef about is that when you installed the french drains, (on your own accord), you discovered a high water table. But you already knew this because when you looked inside the already exisitng sump, there would be water in there too.

So, where is the problem?... it is not the problem of the seller that you want to put a second story on the property. I just do not see where you were ever caused any "pain and suffering" or monetary expense. You admit that you installed the french drain on your own accord, not because there was a present water problem.

gayled: "Jerzeygal calls home inspector (if she had one)and explains the above. When he submitted his report he may have suggested, as logic said, a further evaluation. If he did, and jerzeygal didn't comply - he's off the hook. If he didn't, he will re-visit the site to determine if he missed something. This is obviously subjective. Logic is correct in that an inspection is a moment in time, but if there were conditions that could LEAD to water intrusion, they should have been mentioned in his report. Again, he has a higher standard than a lay person."

I fully agree with the above.

That said, ncrealestateguy has brought up some valid points.

jerzeygal, in re-reading your post, I see that there was no mention of the original existing pump activating every 10-15 minutes during the first few weeks beofre you had the work done (french drain, etc.)

Question is, have all three (existing and two new) been going off every 10-15 minutes...or only the two new pumps?

If the existing pump is also now going off every 10-15 minutes, but was not before the work was performed, could it be that the workers did something that is creating water intrusion that was not present before?

With all of the snow melt, the pumps would indeed be active. Does it happen still now that the snow is gone?

Check to see where the workers put the water dispersion outlet for the two new pumps. If it is too close to the foundation, the water they send out will just settle back in around the foundation, causing the pump to go on very frequently..especially if the slope of the yard is toward the foundation.

We had that issue...extending the outlet solved the problem.

That said..is the foundation block or cement? If block, dry lock is not the best thing on the inside unless the outside is also treated, because when water gets in to the blocks, it would have no way of coming out the other side...and will cause problems in the long run.

Jerzeygal, wow, what a horrible situation. Not a lawyer, but dealt with a similar situation 25 years ago. Bought a home and a year later it flooded the crawlspace, few months later 2 feet in part of house and yard. All the neighbors knew, no disclosure to us. We were stupid first time homebuyers and we did have an inspection, but the seller had a friend who did home inspections (we paid for the inspection) but no mention of flooding. When we went to get financing we did find out we needed flood insurance, so we bought it. Good thing we did as the flood insurance paid off the mortgage after second flood and fixed house. We lived in it for 10 years. When it came time to sell house, we consulted a lawyer, did not want to put anyone through misery we had of not knowing. Lawyer had us write up a 2 page description of the previous flood 9 years earlier and we attached pictures) in disclosure and we still had multiple offers on house.
Now we absolutely wanted to fully disclose, but because of severity of the flood, we wanted to make sure we did it completely correct, thus consulting lawyer. The lawyer told us that as disclosure laws had changed that wtihout fully disclosing the entire situation that it would be fraud on our part. We fully disclosed, but his point was that in case of major water intrustion not fully disclosed or glossed over on our part, that not only could the buyer sue us we could be libel for not only home sales price, but much more, including triple damages.

Though not a lawyer, and having considered suing the seller who sold us the house originally, (and consulting a lawyer) I think you have a valid claim. I personally would pursue it, as litigation is expensive, dealing with flooding house brings so much stress it is unreal and it is very expensive. Just because you file a lawsuit does not mean you have to take it all the way to court. You can start proceedings, and see how it goes. I remember my lawyer always said "a bad settlement is better than a good lawsuit" My advice is file, and see if you can force them to help you fix this situation. You don't have to take it all the way to trial, but filing could put a fire under them to do the right thing.

What claim does she have? The basement has never flooded since she lived there! The owner, either the seller or the previous owner, installed a sump pump that seems to have been working.
We do not know why the new owner felt it necessary to install an interior french drain and new sumps.
And why two new sumps? I have never seen a basement with more than one sump. All interior drain lines should all flow downhill into one sump, unless there is something unique about this setup.

Obviously I'm not a lawyer, but what I was told by two seperate attorney's after my house did flood was that the house I was in had flooded PREVIOUSLY, and since it was not disclosed I could file suit. When I sold I fully disclosed and lawyer was very clear to spell it out clearly, even if new owners never flooded, that it would be be fraud to not disclose and I could be held liable. Every state is obviously different, but if the house basement did flood as neighbor states, then she should have been told. Obviously her attorney needs to advise her.

jerzeygal - you started out asking for some practical advice for what you perceive to be a "failure to disclose" issue. I have to say, I am really impressed with the quality of the responses - you have received some very good information from many knowledgeable posters.

To all the lurkers out there - there is much to be learned from jerzeygal's situation. Buying a home is a complex transaction. No home is perfect - work with experienced professionals that will guide you through the process. A good agent is worth every penny of the commission that they will receive. Have a home inspection by a qualified inspector that you have carefully vetted - price should not even factor into the equation. There is usually only a marginal price differential between companies ($25, $50, $75). Ask questions and document everything.

If anyone reading this is purchasing a FSBO or a short sale, foreclosure, REO property or "As Is" property, please proceed with extreme caution. You need a team of professionals...please don't think you can do it alone. Aside from property conditions, there are financing and appraisal issues as well as a whole bunch of other landmines.

Good Luck, jerzeygal, let us know how things work out. To my fellow posters - you have brought up some really good points. Great job - you guys know your stuff!